KDM Capital Partners
An income-oriented real estate credit strategy focusing exclusively on the lower-middle-market (LMM) CRE sponsors.
Real Estate Credit Strategy
Established in 2017, KDM Capital was created to meet the unique financing needs of lower-middle-market (LMM) CRE sponsors, who are often underserved by both traditional lending institutions & large private pools of capital. While institutional lenders typically focus on larger transactions and banks face increasing regulatory constraints, many experienced LMM sponsors struggle to access flexible and reliable capital.
KDM Capital seeks to bridge this gap by providing tailored credit solutions designed to support high-quality sponsors executing well-structured real estate investments. Through disciplined underwriting and a sponsor-focused approach, the strategy aims to generate attractive risk-adjusted returns while serving a critical segment of LMM CRE Sponsors.
By focusing on the complex needs of LMM and given the sizeable opportunity along with limited competition, the fund is designed to earn attractive yield, provide investors access to a specialized strategy aimed at delivering predictable current income, emphasize capital preservation and long-term value creation.
Investment Strategy
KDM Capital Partners deploys capital through senior secured, floating rate loans with rate floors of short-term duration on US LMM CRE assets. These loans are sourced, underwritten, originated, and serviced internally by KDM’s experienced investment and asset management teams.
KDM Capital focuses on the LMM, a segment that remains underserved by both traditional lending institutions and large pools of private capital.
KDM’s strategic focus on the LMM provides a larger opportunity with limited competition seeks to generate an attractive risk-return profile, current income and capital preservation.
The Fund emphasizes a lender-friendly approach, including low loan-to-value (LTV) ratios, significant sponsor equity that provides critical first-loss cushion within the structured, covenanted indenture. This approach aims to balance risk, and investor returns while providing predictable income distributions.
KDM Capital Partners targets an annual preferred return of 8.0% and a net annualized return in the range of 12-14% for its limited partners (LPs).
Strategy Highlights
KDM Capital Partners focus on the lower-middle-market is a strategic decision means partnering with financial experts who understand your goals, anticipate challenges, and deliver strategies that create lasting value.
Larger opportunity → More manager alpha
Less competition → More attractive return profile
Lower leverage → Less investment risk
Stronger lender protections → Less investment risk
Smaller loan sizes → Actual diversification benefits
Institutional first-mover advantage → Ability to negotiate favorable terms & covenants with limited competition
This focus enables KDM to work with sponsors accessing institutional capital for the first time, providing KDM two very important benefits: (i) structure, lender-friendly structures that deliver enhanced risk-adjusted returns for the benefit of our Limited Partners (ii) build a robust pipeline of CRE Sponsors.
KDM’s investment strategy is highly thematic given the significant asset price reset experienced in 2023 resulting in lower asset valuations. KDM benefits from (i) higher base interest rates, (ii) attractive lending spreads (iii) predictable current income while asset prices appreciate & risk profiles decline (lower LTVs) over the life of the loan.
Each loan KDM originates is structured with adequate interest reserves to support monthly interest payments for the duration of the investment, resulting in predictable current income and enhanced downside protection.
Loans originated at a low loan-to-value (LTV) ratios, supported by significant sponsor equity contributions, creating a critical first-loss cushion and downside risk protection for investors.
Disclosure: The statements contained herein reflect the views and opinions of the adviser and are not guarantees of future results or performance. Actual outcomes may differ materially
KDM’s Portfolio Asset Classes
Multifamily
Mixed use
Retail
The Fund focuses on soon-to-be-stabilized assets with some current cash flow secured by real estate where KDM has high conviction in the underlying asset and geographic location.
The Fund leverages a seasoned credit team that has experienced several investment cycles to originate & execute private debt loans along with an experienced asset management team.
The Fund has monthly subscriptions with capital called immediately. Unlike typical drawdown funds, there are no capital calls where the dates are unknown, and the amounts are unspecified.
Investor capital is deployed immediately.
Immediate deployment may aid investors in avoiding a “J-Curve” return pattern.
Investors may benefit from higher compounded returns.
Investors may earn higher MOICs as compared to IRR returns at comparable drawdown funds, where capital investment is delayed.
Disclosure: J-Curve is a reference to a pattern of returns often associated with private investments where, due to delays in the investment of capital, early returns are negative, primarily from fees, expenses, and limited income. When capital is deployed and begin to earn income, returns can gradually turn upward creating the “J-Curve”.